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 Author Topic: I know you guys wanted this  (Read 2405 times)
the founder
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 September 06, 2011, 08:09:22 PM

Thanks for making the calculator, but it rests on the assumption that every mined coin is sold at market price. As long as people realize that assumption is implicit in that calculation, then it's a valuable observational tool.

It needs to be understood, though, that if miners hold all the coins they mine, then exactly \$0 new dollars are needed to keep the price flat, (ceteris paribus).

You can't ignore it by saying "miners will hide it under their mattress"  That dollar figure has to be added each month directly by either direct investment in dollars, silver, gold, Euros whatever... or directly via goods and services sold (not offered, sold).

Erik is correct.  The supply of bitcoins is determined by the quantity offered for sale.  The demand is determined by the quantity requested for purchase.  The current price is simply the point of equilibrium where the demand matches supply.  Hence, all that is required for the price to remain stable is the number of bitcoins offered to balance the number requested for purchase at that price.

As a result of mining, somewhere between 0 and 50 new bitcoins are entering the supply every 10 minutes, but you can't be sure of the exact number.  Your calculation assumes all 50 newly minted bitcoins are being offered for sale every 10 minutes, in which case ~\$1.4 million in value would need to change hands to support the price.  Now, if the price does hold steady over a period of a month, then it is true that the notional value of all bitcoins in existence would have grown by ~\$1.4 million.  But that's very different than saying \$1.4 million new money has entered the bitcoin economy.

Steve all I am saying is that the bitcoin economy has to exceed the increase in supply.   If the supply increases faster than the economy is developing and growing,  you get inflation.

in this case we get about 50 new coins added every 10 minutes...  \$300 at current prices...  so if the bitcoin economy doesn't grow at 300 dollars every 10 minutes we'll have a decreasing value.

that means 300 dollars has to enter the economy every 10 minutes.. or 300 dollars worth of services added to the economy... regardless of how you spread it,  300 dollars every 10 minutes has to be added in value to the bitcoin economy.

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Nekrobios
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Bitcoin Maximalist

 September 06, 2011, 08:11:01 PM

the bitcoin economy
what
the founder
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 September 06, 2011, 08:13:04 PM

the bitcoin economy...  you know.. the sum of all the trades from person to person, what is used to buy products, what is used to make trades on mtgox , campbx ...  etc.

if someone buys something on bitmunchies that is contributing to the bitcoin economy.

if someone buys coins on mtgox that is contributing to the bitcoin economy.  It would be considered roughly equal to the disbanded M3 money supply chart (they did away with that in the mid-2000's)

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Bitcoin Maximalist

 September 06, 2011, 08:15:59 PM

Is there a "PayPal economy" or "Credit card economy" too? Haven’t heard of that yet.

Bitcoin is not a currency, it’s a payment method/USD proxy. Noone receives wages in Bitcoin. Noone produces the most basic goods for Bitcoins. There’s no cycle.
Steve
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 September 06, 2011, 08:27:15 PM

Steve all I am saying is that the bitcoin economy has to exceed the increase in supply.   If the supply increases faster than the economy is developing and growing,  you get inflation.
If no miner sold any mined bitcoins for an entire month, then the supply would increase by exactly 0 bitcoins... 0 new dollars would be required to support the price (all other things being equal).

Quote
in this case we get about 50 new coins added every 10 minutes...  \$300 at current prices...  so if the bitcoin economy doesn't grow at 300 dollars every 10 minutes we'll have a decreasing value.
But you don't know that...we could get 50 new coins in the supply every 10 minutes, or we could get 0...it depends on whether the miner contributes those coins to the supply or whether they keep them.  If the miner keeps them, no new money is required to keep the price where it is (again, all other things being equal).

Quote
that means 300 dollars has to enter the economy every 10 minutes.. or 300 dollars worth of services added to the economy... regardless of how you spread it,  300 dollars every 10 minutes has to be added in value to the bitcoin economy.
I just mined a block and I'm keeping the bitcoins...tell me, where do any new dollars or services come into play?

(gasteve on IRC) Does your website accept cash? https://bitpay.com
the founder
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 September 06, 2011, 09:05:05 PM

But you don't know that...we could get 50 new coins in the supply every 10 minutes, or we could get 0...it depends on whether the miner contributes those coins to the supply or whether they keep them.  If the miner keeps them, no new money is required to keep the price where it is (again, all other things being equal).

They have to go somewhere eventually unless they are destroyed....  IE: Poland exchange ...  they could sit on his desktop for 20  years,  but eventually they will go somewhere..  hence circling back to where we are now.. delayed.. but 20 years from now those 50 coins will show up and we have to account for it.  plus we are stuck in a negative cycle.   See if the value is increasing people hold on to them thinking they will be worth more..  if the value is decreasing people dump them assuming they will be worth less tomorrow...  currently it's decreasing hence the "hording" isn't happening ... but dumping.. that's happening big time.  Would you hold unto silver if the price was decreasing every day by 20% ?   most likely you'd dump it hoping to buy it cheaper later..   this is what is happening..  I suspect most of these coins are being dumped at any price ...  in 2013 these people will be kicking themselves in the ass... but they have an electric bill to pay now.

Quote
that means 300 dollars has to enter the economy every 10 minutes.. or 300 dollars worth of services added to the economy... regardless of how you spread it,  300 dollars every 10 minutes has to be added in value to the bitcoin economy.

I just mined a block and I'm keeping the bitcoins...tell me, where do any new dollars or services come into play?

keeping it and passing it down for 20 generations,  eventually they come into play.. or as I noted before it's possible they could be destroyed...  which at that point it would be as if they were never created.

What generally happens is the miner gets a 2000 dollar electric bill,  and sells his coins to pay it...  every single month.

The point I am trying to make is that there is a reason those coins are made.. either to be spent.. horded.. whatever... but they are generated for a purpose...  most likely a financial reward.. or to be used in commerce..   other than somone deleting their wallet.dat or harddrive failure those coins will eventually come into play.. or at least that's how they are designed...  why else give a 50 coin reward?

Trust me the bitcoin algorithm is designed to accept an increase of 50 coins every 10 minutes... the expansion rate should match that ... Satoshi assumed that it would grow at X rate for 1 year..  Y rate for year 2  .. Z rate for year 3

The problem is that we hit growth of year 3 during year 2 ... hence the problem...

the adoption rate DIDN'T keep up with the inflation rate....  now it's correctable.. we just need 1.5 million new dollars entering the market (or equal to in services and demand) ..

This sounds like alot of money... but it's the price of 1/2 a Palm Beach Florida house...  it's not that much money in the grand scheme of things.... that would keep the price stable...  OR we could ride it out with a decreasing price until 2013 when the miners get half as much.. new money is entering the system.. just not enough of it to keep the price stable at 50 per block... but most likely enough to keep it stable (or increasing) at 25 per block ...

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the founder
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 September 06, 2011, 09:21:55 PM

Is there a "PayPal economy" or "Credit card economy" too? Haven’t heard of that yet.

Bitcoin is not a currency, it’s a payment method/USD proxy. Noone receives wages in Bitcoin. Noone produces the most basic goods for Bitcoins. There’s no cycle.

Yes there is a paypal economy and credit card economy...  it's what paypal reports each month... same with visa and mastercard.

...  yes I am not disagreeing with you..  I am just stating that if it was just a proxy as you stated it would be tied at a set rate for the USD... and it's not... hence why it's a "weird" entity .

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aq
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 September 06, 2011, 10:09:41 PM

Quote
* Copyright Flexcoin.Com - Feel free to use the formula, just credit flexcoin.com via a hyperlink.

Wow! 3 multiplications! An engineering masterpiece!

PS: please subtract my mined coins, because I don't sell them.
the founder
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 September 06, 2011, 10:29:15 PM

Quote
* Copyright Flexcoin.Com - Feel free to use the formula, just credit flexcoin.com via a hyperlink.

Wow! 3 multiplications! An engineering masterpiece!

PS: please subtract my mined coins, because I don't sell them.

what makes it masterful is the fact that it's simple...   you think E = mc² became popular because it was hard to understand ?

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